Share this

Read more!

Get our weekly email

Enter your email address

Image: The first co-op stores, Rochdale

All
transfers of NHS and other public services to social enterprises, mutuals or
cooperatives is privatisation, irrespective of the ownership model, staff and
user engagement, democratic structures and community support.

This
is not a principled opposition to social enterprises or to the use of public
money to support their formation. However, they should be formed in the private sector, where significant
benefits can be achieved, and not the public.

Health Minister Norman Lamb
recently claimed that the problems encountered at Mid Staffordshire Foundation
Trust would never have happened in a mutually-owned company.

Hopefully not, but Lamb probably
thought that it was very unlikely that the Army would have to be brought in to
provide security at the London Olympics because of the failure of a private
contractor (G4S), or that the Cooperative Bank would be majority owned by hedge
funds.

Lamb’s comments came as the
government launched a review of staff engagement to “…identify the barriers preventing some NHS providers from engaging and
empowering staff, outline good practices within the NHS and other sectors, and
recommend how these can be adopted throughout the NHS. It will look in detail
at the hospital sector but will also consider primary and community care and
relationships with social care”.

The review will assess a range of
options including social enterprise and mutual organisations. For all the talk
of “employee voices” and “their stake in organisations” this approach to worker
engagement is superficial (and made no reference to patient engagement).

“With
some of the better established mutual businesses, the health sector already
showcases the benefits of giving staff a say in the running of their
organisation. We are in a global race and as government looks to support the
next generation of innovative health mutuals, I’m excited to see what ideas are
generated by the Panel.”

New
paths to the market

Privatisation was never solely
about the sale of state-owned corporations (such as Royal Mail). It has mutated. Over the last decade the government has created new ways to marketise and privatise the health economy - extending personal health budgets, patient choice, piecemeal outsourcing, 'commissioning', and private or ’social’ investment.

Mutuals and ‘social enterprises’ are a key new pathway to market-based services.

Markets impose
competition, the domination of finance over social values, profiteering over
public interest. Social enterprises claim to ‘rebalance public sector markets’
by reducing the size of contracts and seeking to reserve the award of some
contracts exclusively to mutuals. But even if they succeed, these measures will
hardly curtail the power of national and international companies.

The
transfer of health services into social
enterprises extends rather than challenges the use of commissioning, competition and markets.

Commissioning is not a
benign process. It splits the client (who identifies needs, plans and pays)
from the contractor (who delivers). It creates an ideological divide and
different vested interests. Even in-house services - if they are not excluded
on spurious grounds - are often treated as private contractors.

There is a loss of direct
democratic control and accountability. Patients are sandwiched in contractual
relations between the NHS and its ‘providers’.

The fact that a social
enterprise may be a collective non-profit organisation does not reduce the
degree of privatisation. It is a contractor as far as the NHS is concerned.

Contracting is expensive.
The costs of the transactions divert core funding of NHS services to management
consultants, lawyers and staff to procure, manage and monitor contractors.
Client costs already account for about 13.5% of the NHS budget with
procurement costs of between 2% - 6%, contract management and monitoring costs
of 1% - 3%, contract cost overruns and variations 5%-30% and contractor’s
profit of between 6%-12% of the annual contract value.

What
of so-called savings? After the honeymoon period, they mostly come from reduced
scope and quality of services, increased user charges with staff made to work
harder and longer for less pay and pensions.

Social
enterprises are little different.

They will endure the same
commercial pressures as other contractors. They will be under significant pressure from private and voluntary
sector contractors who are engaged in a ‘race to the bottom’ cutting jobs,
terms and conditions to remain ‘competitive’ and win contracts. They must raise
capital for investment and finance the high cost of bidding for contracts.

NHS
resources should be targeted at improving in-house services instead of new
providers.

Both
social enterprises and other private companies also lobby for favourable
procurement rules, benefit from tax concessions and public subsidies and find
it easier to implement low pay which forces employees to rely on state benefits.
This is - yet again - corporate welfare.

And
what of the future? We are told that asset lock-ins and
similar mechanisms can limit takeovers by private contractors or vulture funds.
But they have limited value if a social enterprise has financial or performance
problems and faces takeover or closure.

Some social enterprises have
already been forced to form ‘mutual private partnerships’ or joint ventures
with the private sector (for example, the civil service pensions social
enterprise, MyCSP, is only 25% owned by staff members). Central Surry Health, one
of the first social enterprises created from NHS services and the government’s
flagship social enterprise, failed to win another Surrey community services
contract losing to Virgin Healthcare.

What happens if the social
enterprise fails? Unless there is radical political change, retendering is
almost certain to be between private, voluntary and social enterprise
contractors. This is marketisation, and ultimately the privatisation of NHS
services.

Performance

The Coalition government claims - with little supporting evidence - that
social enterprises improve quality, productivity and reduce sickness levels. They
exist so are assumed to be successful.

Pathfinder Social enterprise
Central Surrey Health - to which David Cameron gave a ‘Big Society’ award - scored
below average in all four standards in the new Patient-Led Assessments of the
Care Environments (PLACE) inspection regime in April-June 2013. Its scores on
cleanliness; condition, appearance and maintenance; privacy, dignity and
wellbeing; and food and hydration ranged from 74-90%, compared to a national
average of 85-96%.

In
other areas of public services social enterprises have also faced significant
challenges. A flagship social enterprise, Ealing Community Transport venture
was rescued by a private contractor in 2008. EAGA, a national home energy
efficiency social enterprise was modeled on the John Lewis partnership, but employee
ownership reduced to 37% following a stock market flotation and it was later acquired
by Carillion plc.

Employee
owned bus companies mushroomed following the 1986 deregulation and
privatisation of municipal bus companies. Twenty-three bus companies had substantial
employee ownership by 1993 but by 2009 there are none.

Greenwich
Leisure Limited is one the Coalition’s favourite social enterprises, but
operates as a Greater London leisure contractor with private sector bidding and
employment policies. Several other leisure trusts have collapsed.

The
Tower coal mine cooperative in Wales operated successfully for 13 years but was
forced to close in 2008, as it required significant new investment to sink a
new shaft to open additional seams.

Mutually-owned
building societies have a long history of providing savings and mortgages in
the UK. However, ten large building societies were demutualised, either via
stock market flotation or takeover by banks, commencing with Abbey National in
1989 and culminating in a frenzy of carpet-bagger and investment bank activity
between 1995- 2000 in search of windfalls. All ten subsequently lost their independence.
Three are foreign-owned, two exist only as trading names, three
were rebranded, and two were nationalised in the bank-bail outs of 2008.

The
Cooperative Bank’s problems originated in the merger with Britannia Building
Society, which had poor-performing commercial property investments. Further
problems arose when it sought to acquire 632 branches from Lloyds Bank and the
financial regulator revealed the Co-op Bank did not have the capital or borrowing
power to fund the deal. But the bank has another cash machine.

“The
Co-operative Bank’s expertise in public sector financing has helped us build a
strong Private Finance Initiative (PFI) and Public Private Partnership (PPP)
portfolio. We have proven experience in both areas and operate as lead
arrangers on various transactions. As well as being recognised as one of the
UK’s lead providers of NHS LIFT finance, we have also been involved in a large
number of PFI projects including healthcare” (doctor’s surgeries to
integrated care centres), education, social housing and emergency services.

So much for ethical banking and sustainable
development!

The way forward

Social
enterprises in the private sector: A strategy to expand social enterprises must be rooted in the private
sector. Bolivia shows how such an approach could provide an alternative to
austerity. The government issued Supreme Decree 1754 in October 2013 that
allows workers to establish social enterprises in businesses that are bankrupt,
winding up, or unjustifiably closed or abandoned. Article 54 of Bolivia’s
constitution states that workers:

“…in defense of their workplaces
and protection of the social interest may, in accordance with the law,
reactivate and reorganize firms that are undergoing bankrupty, creditor
proceedings or liquidation, or closed or abandoned without justification, and
may form communitarian or social enterprises. The state will contribute to the
action of the workers.”

Imagine if Boots the pharmacy were mutualised - or
the pharmaceutical industry!

Abolish
commissioning: We must re-integrate client and contractor in the NHS and
other public services. Otherwise the
commissioning model will permanently reduce directly provided NHS services and
will make service provision dependent on markets and contractors. It will
systematically de-skill the NHS, expand the market and have a profound effect
on the local health economy. Re-integration should involve patient and community
organisations, staff and trade unions in the planning and design of services
and radically improved democratic accountability and transparency.

Strategic
improvement: We need NHS staff and their trade unions to work with NHS
campaigns to develop a strategy that focuses on improving in-house health
services. Learning from campaigns like Gloucestershire we need to challenge the commissioning
model and persuade the Labour Party to rescind its support of the NHS social
enterprise model.

More
NHS staff and their unions are likely to be put in a difficult position where
in-house options are ‘eliminated’ and the ‘choice’ of transfer is to a social
enterprise, private contractor, or a delusory ‘partnership’ between the two. Unions
must help their members faced with such a choice to promote in-house solutions
and build community support. It is not good enough for unions to campaign
against the policy nationally whilst negotiating implementation locally.

There is a real danger of social enterprises and
‘partnerships’ becoming another version of PFI’s ‘only show in town’ with
drastic long-term consequences for the NHS, staff and patients.

Privatisation by another
name

Neoliberal
public policies, such as commissioning, outsourcing and private finance, have
been designed by one government and accelerated by subsequent governments.
Formal Labour and trade union opposition has been muted. Policy reversal and a
return to public provision has become politically ‘unthinkable’ - despite the
fact that poll after poll shows that this is what the public want.

Social
enterprises and so-called ‘mutualisation’ of public services is being used to
shrink the public sector. Transferring services to a new organisation external
to the NHS reduces the security and flexibility of NHS services, and transfers
financial, employment and operational risks to new organisations that may not
be able to bear it.